Purchasing a house is the most important investment a family will ever make and it is a long and stressful process. Even saving up for the deposit on a loan can be a mountain to climb for families with low income and no savings. Housing programs for low income families can make buying your first home much more comfortable.
Housing Programs for Low Income Families
The Federal Housing Administration also known as the FHA has a home loan program that you may be eligible for if you belong in the low income bracket. These loans and mortgages are insured by the FHAs Government assistance program, covering the lenders if you happen to default. This safety net means that there is less risk for the lender and borrower and therefore can offer lower rates for loans and mortgages.
Check If You Qualify for an FHA Mortgage Financial Requirements
After the events of the credit crunch in 2011 it is a requirement for people who apply to have a credit score of at least 500 or more to be able to get their hands on a FHA loan. The Banks lending the money can also have their own requirements but 500 is what is required by the FHA scheme and is sort of a benchmark.
If you do not have a great credit score the there are a few things you can do to improve it so you can qualify for the FHA mortgage. First thing to do is go to your bank or credit union and get a credit card with a low interest rate; put your next lot of shopping which are essential items on it and immediately pay it off thereby improving your credit score. Be careful and make sure you don’t use it for anything else that you cant pay off as you will be in a worse position; you do not want to destroy your credit score by not being able to pay off a new credit card. Alternatively, you can take out a smaller personal loan and pay it off as fast as possible. It will take time to build your credit score but it will be worth it in the long run when you can qualify for a federal low income house loan.
Make Sure You Qualify for an FHA Mortgage Deposit Requirements
For all home loans you still need a deposit and this may take time to save, the FHA loans are much smaller than normal home loans, which help in terms of repayments. The FHA down payment is 3.5%, much lower than you will find anywhere else despite the recession. However, to get the FHA 3.5% down payment option you must have a credit score of at least 580 so you must work on improving your ratings. This can be done. If you can take it to 500 then be patient and wait until it gets to 580 to get a more competitive rate.
Trying To Qualify for an FHA Mortgage – Budget Comparison
This is the reason you paid off your credit card completely when you spent money on groceries. For you to be eligible for a federal low income house loan you must pass a ‘front-end’ debt ratio and a ‘back-end’ debt ratio; this is easier said than done but it is possible. The first is simply how much debt to income you will have if you get the mortgage. Can you pay back what you borrow is what this calculation is used for. The ‘back-end’ debt ratio includes all of your other debts; credit cards, personal loans, etc. The front-end ratio is 29% debt to income and the back-end ratio is 41%. If you meet these requirements then you will be eligible, if not you need to sort your finances out.
The Drawback of FHA Loans
The disadvantage of an FHA mortgage over other home loans is that you will be paying into an insurance premium for the cover you are receiving from the FHA. There are two main premiums that you will have to pay to be eligible; a smaller up-front premium and then a yearly premium on top of your normal mortgage repayments. Although it is another thing that you will have to manage a federal low income house loan from the FHA is still going to be much cheaper than a standard home loan.
More Options Other Than FHA Government Programs
Depending on where you want to settle you may also be able to apply for a state home loan program in the USA. There are several programs available, the requirements are very different from state-to-state but it is definitely worth considering. The terms may be more favorable than the FHA loan. You can often find government home loan information on your state’s government website. If you found this article helpful check out the following:
Loans for people on Welfare
Payday Loans for unemployed
Quick Cash Loans for people on Benefits